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Economy posts first job losses in seven years

Severe weather battered the U.S. economy in September, leading to the first job losses since 2010, the government reported on Friday.

The labor market lost 33,000 jobs last month, though the unemployment rate fell to 4.2 percent, the lowest in 16 years.

Major hurricanes Harvey, Irma and Maria last month devastated parts of Texas and Florida and all of Puerto Rico, weighing heavily on jobs.

"Although the headline number for September is a loss of jobs, the first in seven years, the labor market remains in good shape," PNC chief economist Gus Faucher said in a statement.

"The job losses were due to disruptions from Hurricanes Harvey, Irma and Maria, not underlying weakness in the economy," Faucher added.

Economists had expected a rough report because of the hurricanes, but the results were even weaker than predicted, though they could always be revised upwards in a future report.

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"Job growth should resume in October as the impact of the storms fades, and in fact will get a boost through the rest of this year and into 2018 because of rebuilding efforts, supported by federal aid and insurance payments," Faucher said.

The economy grew at a faster-than-expected clip of 3.1 percent in the April–June quarter, according to recent data from the Commerce Department.

Top Republican and Democratic House leaders acknowledged the devastating effects of the hurricanes and used Friday’s report to spar over GOP plans for tax reform.

“By passing a budget that paves the way for tax reform, the House took a major step yesterday toward creating more jobs, fairer taxes, and bigger paychecks,” Brady said.

“In the weeks ahead, the Ways and Means Committee will move forward with pro-growth, pro-middle-class tax reform legislation that Congress will ultimately send to the President’s desk this year, for the first time in 31 years.”

House Democratic Leader Nancy Pelosi (Calif.) said “the devastation of the hurricanes has laid bare the corrosive effect of the Republican Congress’ total refusal to act on jobs and wages for working families.”

“Republicans should abandon their job-killing giveaways for the richest and focus on raising wages and creating jobs for hard-working Americans,” she said.

“Instead, the GOP is pushing a budget that would devastate America’s investments in good-paying jobs, growing wages and dignified retirements — all to fast-track deficit-exploding, multi-trillion dollar tax breaks for the wealthiest 1 percent.”

The September jobs report was a strange brew of bad and good data.

Job growth in August and July was revised down, to 38,000 less than previously reported.

But, as opposed to payroll data, a survey of U.S. households showed that employment grew by a massive 906,000 in September, helping push down the jobless rate to the lowest level since February 2001.

The household survey is an estimate of employed Americans, not of total jobs, and covers those who wouldn't show up on a payroll, such as the self-employed.

“I know the household survey is noisy, but even if you only put a little weight on a huge number, the big number is still good news,” Justin Wolfers, an economist at the University of Michigan, said on Twitter. Wolfers said there has probably never been a divergence this large between the 33,000 payroll number and the 906,000 figure.

The economy has added an average of 172,000 jobs a month over the past year, but with the September figures, that has dropped to a 91,000 average over the past three months.

Restaurants and bars were hit hardest by September’s storms, with a sharp 105,000-job drop in the sector.

Mark Hamrick, Bankrate.com senior economic analyst, said “The Wizard of Oz” comes to mind when examining the latest report, specifically the “pay no attention to the man behind the curtain” line.

“Because of the impacts from hurricanes and flooding, the decline reported in September payrolls doesn’t carry weight this time around,” Hamrick said.

“Case in point, the loss of more than 100K jobs in food and drinking establishments is surely only temporary,” he added.

Average hourly earnings showed signs of life, rising 2.9 percent over the past 12 months, up from the recent trend of about 2.5 percent growth.

After the 2008 financial crisis wiped out jobs for several years, the labor market finally started to turn around in October 2010.